US stocks dip after steep sell-off

Trading floor of the New York Stock Exchange

Stocks slipped on Monday, giving up modest gains in late morning trade on lingering worries about the upcoming debate on the fiscal cliff.

Adding to concerns, Barclays cut its year-end target for the Standard & Poor’s 500 to 1,325 and cited fiscal cliff issues as a reason.

Reuters reported that the S&P 500 dropped 2.4 per cent last week, the worst week for the benchmark index since June. It closed below its 200-day moving average for the first time in five months, and an extended run under that level could signal further losses ahead.

Trading volume is expected to be light, with the US bond market and government offices closed on Monday for the Veterans Day holiday.

Last week’s weakness was partly propelled by concerns about whether there will be a timely solution to avoid the fiscal cliff, a combination of government spending cuts and tax increases set to go into effect early next year unless Congress acts to change the law before then. Though most consider it unlikely that a deal will not be reached, analysts fear going over the cliff could push the economy back into recession.

“Hopefully, we’ll be ready for the barrage of US political soundbites and opinions on how to come to an agreement between Democrats and Republicans,” said Peter Boockvar, managing director at Miller Tabak & Company, in New York.

“It may very well be the sole driver of stock performance into year-end with the economic consequences of such a deal being a focus only beginning in 2013.”

The S&P 500 is still up about 10 per cent for 2012, though recent months have eroded those gains. The Nasdaq has fallen for five straight weeks.

The Dow Jones industrial average was down 27.76 points, or 0.22 per cent, at 12,787.63. The Standard & Poor’s 500 Index was down 2.06 points, or 0.15 per cent, at 1,377.79. The Nasdaq Composite Index was down 6.42 points, or 0.22 per cent, at 2,898.45.

Apple Incorporated shares fell 0.6 per cent to $543.93 after rising earlier on a global patent settlement with HTC Corporation, as well as a 10-year licensing agreement. Apple’s stock has been under pressure recently, dropping more than 20 per cent from its 2012 high to enter bear market territory.

But some major acquisition news gave investors some reasons for optimism on Monday. Precision Castparts Corporation offered to buy Titanium Metals Corporation for $2.9bn, while Leucadia National Corporation agreed to buy investment bank Jefferies Group for $3.6bn.

Shares of Titanium surged 42.3 per cent to $16.46 while Jefferies climbed 12.8 per cent to $16.09. Precision rose 5.6 per cent to $181. In contrast, Leucadia fell 4.6 per cent to $20.80.

 

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US stocks dip after steep sell-off